Quarterly Bulletin Q3 2013

50
Financing Developments
Quarterly Bulletin 03 / July 13
in the Irish Economy
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Chart 19: Household Debt
€ billion
% of Disposable Income
Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4 Q2 Q4
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Debt (LHS)
Debt as a per cent of Disposable Income (RHS)
Sources: Quarterly Financial Accounts, Central Bank of Ireland;
and Quarterly National Accounts, CSO.
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Household investment in financial assets
continued on an upward trend during Q4
2012 to €1.6 billion (Chart 20). This increase
was largely due to improved household
transactions in ‘currency and deposits’.
Households moderately reduced investment in
‘shares and other equity’, although to a lesser
extent than previous quarters, while ‘insurance
technical reserves’ declined slightly.
Household savings remained high at
€2.8 billion for Q4 2012, when measured as
a four-quarter moving average (Chart 21).
Combining household ‘saving’ and ‘gross
capital formation’ data from the CSO’s nonfinancial
accounts (i.e. the real side of the
economy) with households’ transactions data
from Quarterly Financial Accounts allows a
decomposition of how households use their
savings. During Q4 2012, households used
their savings to reduce liabilities (€1.6 billion),
to invest in financial assets (€1.6 billion) and, to
a lesser extent, to contribute to gross capital
formation (€1.1 billion).
Overall, household net worth at Q4 2012 was
35.6 per cent lower than its peak at Q2 2007.
This decrease in net worth largely reflected
declines in housing asset values.
Household debt 13 continued to decrease
during Q4 2012, falling by €2.9 billion or 1.7
per cent, to stand at €173.9 billion or €37,928
per capita (Chart 19). This is the largest decline
since Q2 2010. In overall terms, debt has
reduced by 14.7 per cent, or €29.9 billion,
since its peak of €203.8 billion at Q4 2008.
Household debt to disposable income, an
indicator of debt sustainability, also declined
further during Q4 2012, to stand at 201.6
per cent. At Q4 2012, this indicator was at its
lowest level since Q4 2006, following a sixth
consecutive decline from its peak of 221.6
per cent at Q2 2011. The decrease in this
indicator during Q4 2012 was as a result of
the continued decline in household debt, while
household disposable income has been on an
upward trend since Q4 2011.
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Chart 20: Household Transactions in Financial
Assets, Four-Quarter Moving Average
€ billion
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Currency and Deposits
Insurance Technical Reserves
Total Transactions in Financial Assets
Shares and Other Equity
Other
Source: Quarterly Financial Accounts, Central Bank of Ireland.
13 Household debt is represented by total household loans at the end of each quarter.